A Message from the Alabama Association of REALTORS®
The coronavirus disrupted the way the world conducts business, and the real estate industry is no exception. One might think that a worldwide pandemic would slow or even stop the home buying and selling process, but in reality, it was quite the opposite. The pandemic and ensuing quarantine caused many Alabamians to take a close look at their current home and decide whether it met their needs. Add in historic low mortgage rates, and we have the perfect environment for real estate transactions.
The increase in demand coupled with the short supply in existing homes makes for a competitive market, raising the average price of homes in many markets. According to a recent survey by the National Association of REALTORS® (NAR), the average sales price for those selling after March was $300,000 compared to $270,700 for those who sold before that time. Furthermore, nearly a quarter of buyers who purchased after March paid $500,000 or more for their new home. That assessment is consistent with Huntsville broker Kathy Mann’s experience. Her clients at CK Mann Realty were “often looking for their dream home,” said Mann.
“My clients, many who were nearing retirement age, were not looking to downsize. Instead, they wanted larger homes and communities with amenities like outdoor space, walking trails and swimming pools.” Many were looking for at least four bedrooms and two baths in move-in ready homes, according to Mann. “With inventory low, we try to prepare clients for the market where they may have to compromise by taking on a kitchen renovation.”
While an increase in home prices may not seem like a good thing for consumers, it’s great for Alabama’s economic health as the housing market is vital to Alabama’s economy. In fact, in 2019 the real estate industry accounted for $33 billion of Alabama’s gross state product, with an overall economic impact of $65,356 per house sold.
Home buyers and sellers in 2020 also worked with real estate professionals in record numbers, according to the survey. Only eight percent of recent home sales were For-Sale-by-Owner (FSBO) this year, which is the lowest share reported since NAR began its annual survey in 1981. Those homes typically sold faster than agent-assisted sales – often because homes were sold to someone the seller knows– but for significantly less at a median price of $217,900 compared with $242,300 for agent-assisted homes.
The National Association of REALTORS® 2020 Profile of Home Buyers and Sellers is a survey of homebuyers who purchased a primary residence between July 2019 through June 2020. The survey contained 131 questions on topics ranging from the buying and selling experience to financing home purchases and includes demographics on buyers and sellers. This year’s survey also offered contrasts between homebuyers and sellers before and during the COVID-19 crisis.
Home Buying and Selling During a Pandemic
COVID-19 had an impact on nearly every facet of the buying and selling experience, according to the report. “Buyers who purchased during the onset of COVID-19 were more likely to have higher household incomes, purchase at a higher price point and more likely to purchase a multi-generational home.” An increased number of buyers were seeking suburban homes (57 percent) or small-town homes (23 percent). Before April, sellers cited a desire to be closer to friends and family as their primary reason for selling. After April, sellers were looking for larger homes and became more urgent to sell.
2020 Home Buyer and Home Characteristics
A married couple in their mid-40s with a household income of $96,500 is a snapshot of the typical 2020 homebuyer.
- Married couples represented 62 percent of buyers.
- 19 percent were single females.
- Nine percent each were single males and unmarried couples.
- Veterans and active-duty military represented 20 percent of buyers.
What consumers were looking for in a home changed over the course of the pandemic as demand for secluded rooms for working or e-learning rose.
“With many people using their dining room table as their office, there has been an uptick with buyers looking for a home office,” said RealtySouth President and CEO Richard Grimes of Birmingham. “Those same buyers are looking for a great outdoor area and extra living space for a little more peace-of-mind in their working-home. The buyer need coupled with the incredibly low interest rates, we see buyers making offers on the spot.”
In addition to home offices and great outdoors spaces, what were buyers looking for in 2020?
- 15 percent purchased new homes and 85 percent purchased previously-owned homes.
- Detached single-family home purchases were most common at 81 percent, followed by townhomes at seven percent.
- “Senior” housing purchases accounted for 12 percent.
- A 1,900-square foot home with three bedrooms and two bathrooms built in 1993 was the typical home purchased, and it was located within 15 miles of the buyer’s previous home.
- Buyers paid a median of $272,500 and typically paid 99 percent of the listing price.
While buyers were willing to pay more, they relied heavily on real estate professionals to help them find the right home. Agents or brokers assisted 88 percent of homebuyers and six percent purchased homes from a builder or his agent. Ninety-one percent of buyers said they would recommend their agent to others.
Selling a Home in 2020
Like last year, most sellers had lived in their homes for 10 years before selling for a median increase of $66,000 more than their purchase price. Nearly half of sellers attracted buyers by offering an incentive. Julie Minto, a broker at LLB&B Real Estate in Mobile, stated that homes are selling faster in her market.
“We joke with sellers: ‘Be careful if you mention that you may be willing to sell your house! We will sell it before you say, maybe!’ For one that is in good, updated condition that is priced right…we will have it sold within days and often times with multiple offers,” Minto continued. “Buyers need to be preapproved and ready to pounce! This market is HOT!”
The Bottom Line
“While every year is a unique time capsule where buyers and sellers purchase amid a changing economic environment, 2020 is especially distinctive as COVID-19 impacted Americans’ lives starting in March 2020,” said NAR. In Alabama, REALTORS® felt the impact but adapted to the challenges. RealtySouth in Birmingham made history with Alabama’s first 100% fully remote closing in March – just days after Governor Kay Ivey’s order restricting businesses and gatherings. The event took place by video conferencing with the buyers, closing attorney, loan officer, and managing broker remotely present for the event. “When the coronavirus first swept through Alabama, most home buyers went dormant for a minute,” said Richard Grimes. “Once the shift to virtual open houses and virtual closings were put into place, home buyers came out with a vengeance. Buyers are trying to make up for time they lost looking for their dream home.”
“It’s easy to say things like ‘we had a great year’ or ‘the market is still hot,” Lee Harris, Broker/Owner at Coldwell Banker Alliance and 2020 President of the Lee County Association of REALTORS® said. “That may all be well and true, but I always say, ‘The numbers never lie.’ In 2020, our average listing was scooped up by a purchaser in 39 days. For the same period a year prior, it was 44 days. I think these numbers indicate that while COVID-19 changed the way we physically handle business and interact with clients, it did not have a significant impact on how long it takes a purchaser to make a decision about housing.”
From Huntsville to Mobile and markets in between, survey results and boots-on-the-ground experiences indicate that REALTORS® and their clients capitalized on the opportunities and challenges of 2020.
The Alabama Association of REALTORS® (AAR) is the largest statewide organization of real estate professionals comprised of over 16,000 members from 25 boards and 1,200 real estate companies. United by adherence to a Code of Ethics, our members work as real estate professionals in the sale, lease, appraisal, management and development of residential, commercial, rural and resort properties throughout Alabama.